Adobe (NASDAQ:ADBE) surpassed third quarter estimates, increased its outlook and hit its $250M annual recurring revenue target for artificial intelligence-first products a quarter ahead of schedule, but several analysts are waiting for more.
Shares climbed 3.5% during early market trading on Friday.
“Adobe announced a better-than-expected quarter with the headline, for us, being the small but quickly growing AI-first products hitting its $250M ARR target a quarter early,” said KeyBanc analysts Jackson Ader and Jack Nichols in an investor note. “The outlook for next quarter is moving higher, but we are not yet certain the green-shoots are there for a full-fledged, material acceleration in FY26 at this point.”
KeyBanc maintained its Sector Weight rating on the stock and has not assigned a price target.
“AI-first products, which collectively include Firefly, Acrobat AI Assistant, and GenStudio, surpassed $250M in ARR this quarter,” Ader added. “This is a quarter ahead of the initial hope. CEO, Shantanu Narayen, didn’t want to pick favorites, but our belief is that with all the packaging changes thus far in FY25 to encourage Firefly usage and adoption, this is the product set driving the upside.”
Meanwhile, Citi reiterated its Neutral rating and $400 price target as it felt Adobe’s third quarter results and outlook were largely in line with expectations.
“Given the Q3 DM NNARR beat and FY25 DM ARR outlook were largely in line with expectations, we don’t expect any material moves in the stock,” said Citi analysts, led by Tyler Radke, in a note.
However, Goldman Sachs analysts were more positive on the long-term implications for the stock, reiterating its Buy rating and hefty $570 price target.
“Early proof points of AI momentum leave us constructive,” said Goldman Sachs analysts, led by Kash Rangan, in a note. “Specifically, AI-first ARR has already surpassed Adobe’s $250M target initially set for F4Q25, giving us conviction that the company can exceed its 11.3% F25E DM ARR growth guidance. Should this momentum extend into F26E, AI has the potential not only to stabilize DM ARR growth but also to rejuvenate it – turning around the current deceleration trajectory into modest reacceleration.”
Adobe competitors Figma (FIG) and Salesforce (CRM) were showing little price movement during early Friday trading.